Debt Overhang and Investment Efficiency

Marcin Wolski, Francesca Barbiero and Alexander Popov

No 12784, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Using a pan-European dataset of 8.5 million rms, we find that firms with high debt overhang invest relatively more than otherwise similar firms if they are operating in sectors facing good global growth opportunities. This effect is robust to controlling for firm fi xed effects and for country-sector-time fixed effects. At the same time, the positive impact of a marginal increase in debt on investment efficiency disappears if fi rm debt is excessive, if it is dominated by short maturities, and during systemic banking crises. Our results are consistent with theories highlighting the disciplining role of debt over equity.

Keywords: Investment misallocation; Debt overhang; Banking crises (search for similar items in EconPapers)
JEL-codes: E22 E44 G21 H63 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://cepr.org/publications/DP12784 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Debt overhang and investment efficiency (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:12784

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP12784

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().